How Swiss Strategy on Holocaust Fund Unraveled

By ALAN COWELL

Published: January 26, 1997

BERN, Jan. 23—
Early last month, a senior Swiss diplomat sent a confidential cable addressed to only his closest aides. Instead, it was circulated to the country's top politicians and set alarm bells ringing.

According to people who have seen it, the cable led the politicians to believe that American Jewish groups were threatening to orchestrate an array of sanctions if Switzerland did not issue a ''declaration of intent'' to set up a $250 million fund to compensate the families of Holocaust victims and survivors.

Jewish groups, the Swiss politicians concluded from the cable, were poised to organize a boycott of Swiss banks, set up picket lines outside Swiss institutions in the United States, arrange unflattering press coverage and file class action suits if Switzerland did not capitulate by February 1997. It said the Swiss could respond in two ways: be conciliatory or put up hard-nosed resistance.

The Jewish groups mentioned in the cable adamantly deny making such threats and say the proposal for a fund of several hundred million dollars came from the Swiss. But the cable was quickly seized upon by many Swiss politicians and officials, who saw it as evidence of a vast anti-Swiss conspiracy involving Jewish groups, public manipulation, and American financial institutions that stood to benefit.

The President of Switzerland, who received the cable, gave an interview just a few weeks after it arrived in which he accused Jewish groups of engaging in blackmail.

This week, after taking a beating in world public opinion for months, the Swiss Government agreed in principle to establish the fund. But the repercussions will not be easily erased. This country, which is only now coming to grips with its World War II history, has seen a surge of anti-Semitic sentiment in recent weeks that one Jewish leader characterized as an ''avalanche.''

The dispute over the Holocaust has shaken a Swiss self-image founded on what one official termed this week the ''humanitarian traditions of Switzerland.''

Switzerland was neutral in World War II. At the center of the dispute between it and the Jewish groups are accusations about this country's wartime conduct.

There have been charges that Switzerland effectively acted as Hitler's banker, laundering gold looted from countries conquered by the Nazis. Questions have been raised about money deposited by Jews later killed in the Holocaust, with suggestions from critics that Swiss banks pocketed the accounts after the war. Finally, there have been documented reports by historians that the Swiss police turned back up to 30,000 Jewish refugees at the country's border, leaving them to face the threat of deportation to the death camps.

The confrontation between the Jewish groups and Switzerland has been building for years. But it turned significantly more rancorous after a luncheon meeting last month in the private dining room of Edgar Bronfman on the fifth floor of the Seagram Building at 375 Park Avenue in Manhattan.

The main participants -- Mr. Bronfman, President of the the World Jewish Congress as well as of Seagram, Israel Singer, the organization's secretary general, and Thomas Borer, Switzerland's point-man in the conflict with American Jews -- agreed to keep the details of their conversation secret.

At the time, the Swiss authorities were still publicly resisting demands by American Jewish groups for a fund to compensate Holocaust survivors. Pressure was building for punitive measures against Swiss economic interests.

After the Dec. 9 meeting, Mr. Borer cabled to Bern a three-page report. In it, the Swiss diplomat gave a clear impression that the luncheon had become an arena for threats from the World Jewish Congress. The report said that if Switzerland made a ''declaration of intent'' to create a fund, American Jewish groups would turn down the heat.

Elan Steinberg, a spokesman for the World Jewish Congress in New York, said in a telephone interview that the accusations of threats were untrue. Indeed, he said, the proposal for a specific figure for a Holocaust fund -- put by other American Jewish officials at between $230 million and $300 million -- had come from the Swiss themselves. Moreover, he said, in the view of Mr. Bronfman and Mr. Singer, the meeting ended as it began, on a friendly note. Even Mr. Borer's cable characterized the beginning of the encounter as amicable.

But that is not how it played in Switzerland. According to senior officials here, Mr. Borer addressed his message only to four members of the task force set up by the Swiss Government last year with Mr. Borer at its head to deal with the crisis.

In his view, the document was intended only to set out the options Switzerland faced and was not intended for circulation outside Mr. Borer's immediate entourage, according to officials familiar with his account of events.

Other Swiss officials circulated the report -- and further diplomatic assessments drawing similar conclusions -- among the seven members of Switzerland's Cabinet. Initially, Government ministers kept their knowledge of the document a secret.